Imagine, if you will, an unlikely meeting between classic action RPG Landstalker and The Big Lebowski. This was my immediate impression on playing Bastion, an Xbox Live action RPG, developed by indie start-up Supergiant Games.

Don't get me wrong, Bastion is not a role-playing game about a laidback bowling fanatic who blunders into a surreal kidnapping plot (although that would be awesome). No, it's an isometric fantasy game, with a fairly straightforward plot about a young hero waking up to find his world in chaos thanks to an event named The Calamity. His job is to put it back together, or at least find his peoples' safe haven, the eponymous Bastion.

The Big Lebowski bit is the voice-over. Throughout the game, the Landstalker-style isometric visuals are accompanied by a continual narration that captures all the laconic charm of Sam Elliot in that cult Coen Brothers flick. And cleverly, this voice comments on every player action: bump into enemies, draw a sword, or fall off the side of the gameworld, and the story-teller seamlessly builds it into his drawl.

Bastion

It's a lovely system that marries story and interactivity in an innovative and charming way. It also conjoins perfectly with the presentation, in which the game environment physically builds itself just in front of you as you move, as though your actions are prodding the world in to life. Perhaps it's a smart metaphor for the gaming experience, the whole interplay between designer and player. Or it could just be a nice graphical effect. Whatever, it works.

On the route to Bastion, there is much to explore, plenty of enemies to dispatch and, of course, a hefty armoury to discover. "There are over 10 different fully upgradeable weapons in Bastion, each with its own unique mechanics," explains creative director, Greg Kasavin.

The first you encounter is called the Cael Hammer – a reliable melee weapon. In another area of the E3 demo, you were able to use the War Machete, a very fast melee weapon that can also be thrown. Later, there's a Scrap Musket ("essentially a shotgun which can cause great damage up close and hit several foes") and the Brusher's Pike, a long-range melee weapon. These can all be upgraded via an intuitive system that lets you fully mould the hero, opting for super tank-like destruction, sneakery or distance killing.

But what got me on the E3 showfloor were the lovely hand-drawn 2D visuals, a rich re-interpretation of the classic tactical and action RPGs of the 16- and 32bit eras. "The style came really naturally," says artist Jen Zee. "When I joined the team, Greg told me that the story is post-apocalyptic, but that they also wanted to emphasise the fact that, in the face of destruction, there's often beauty as well.

"That resounded with me, because I've had my share of grey and brown apocalyptic games. I wanted to introduce rainbows into the post-apocalypse! The rich and colourful style was informed by that, but also, strategy RPGs were a big part of my gaming childhood – Final Fantasy Tactics, for example, and the Shining Force games. I was self-consciously trying to project what those artists would have done with 1080p HD visuals."

Bastion

The good news is, Bastion has been chosen for this year's Summer of Arcade, the annual promotion in which Microsoft highlights five of the most interesting new XBLA titles (you should also check out Ubisoft's fascinating From Dust when the season kicks off in July). It's a strong start for this small San Jose-based team.

"We're just seven guys working out of a living room," says Kasavin. "We all have Triple A backgrounds. Several of us worked at EA LA on the Command and Conquer franchise and another team member worked on Modern Warfare at Infinity Ward. We have a lot of experience, but we decided to break off and do something on our own. So we kind of moved into a house together and started on this…"

It seems, then, that Bastion isn't just an interesting riff on the action RPG genre, it's also a fascinating sociological experiment – can a team of developers live and work together? We'll await the game – and the reality TV series – with considerable interest.